Across-the-board tax cuts ‘good news’ for N.B. economy, say critics

Across-the-board tax cuts ‘good news’ for N.B. economy, say critics

FREDERICTON – Finance Minister Victor Boudreau announced significant tax cuts in his budget but New Brunswickers will have to wait a few years before receiving the full benefits of the savings.

Under the changes, the number of tax rates in the province would drop from four to two over the next four years. New Brunswickers earning less than $37,893 will be taxed at a rate of nine per cent in 2012-13. New Brunswickers with higher incomes will be taxed at 12 per cent.

“We’re certainly hopeful that New Brunswickers will choose to reinvest those savings into the local economies,” Boudreau told reporters. “We heard the message loud and clear in 2006, and since then, that people wanted their kids to come back home and to pay less tax.”

The drop in rates and income brackets will be phased in gradually. A single New Brunswicker earning $30,000 will save $113 next year and a total of $395 in 2012. A single New Brunswicker earning $60,000 will save $429 next year and a total of $1,307 in 2012. A one-income family earning $60,000 will save $413 next year and a total of $1,283 in 2012.

Employees will notice the changes on their paycheques beginning July 1. Because the tax cuts are retroactive to Jan. 1, 2009, New Brunswickers will see their salaries jump by a larger amount as a year’s worth of cuts are being divided among six months’ pay.

The personal income tax cuts will cost government $118 million next year. By 2012-13, the cuts will cost government $323 million annually. Boudreau said legislation will be introduced to ensure the tax cuts are realized each year.

The two-rate structure was one option outlined in a discussion paper on taxation commissioned by the Liberals last year. Although Boudreau is rejecting the report’s other option of a flat tax rate of 10 per cent, critics praised yesterday’s announcement.

“Have they made themselves far more competitive than they are today? Absolutely,” said Charles Cirtwill of the Atlantic Institute for Market Studies.

Once the changes are implemented, New Brunswick will have the most competitive tax rates in Atlantic Canada and one of the most competitive systems in the country, he said.

Kevin Gaudet of the Canadian Taxpayers’ Federation agreed now is the time for governments to cut taxes.

“That is exactly what they should be doing,” he said.

The Liberals also announced a number of business tax cuts, including reducing the corporate tax rate from 13 per cent to eight per cent over the next four years.

The federal government had called on all provinces to reduce their rates to at least 10 per cent.

“I am encouraged by the progress being realized to date and believe that businesses and the citizens of New Brunswick will benefit significantly from the provincial government’s proposal to reduce its corporate income tax rate to 10 per cent in 2010,” federal Finance Minister Jim Flaherty said in a statement. Government also announced a number of targeted tax credits for businesses, including a forestry investment credit, small business credit and an energy rebate for certain industries.

“For anyone who likes tax reductions, it’s a good-news budget,” said David Plante of Canadian Manufacturers and Exporters. “The measures that were introduced today will most definitely have an impact on the investment climate over the longer term.”

But Riverview Conservative MLA Bruce Fitch said New Brunswickers shouldn’t be too quick to believe the Liberals’ promises of lower taxes.

“It took them about 15 minutes to put the taxes up two years ago but now it’s taking them four years to reduce them,” he said.